Consulting Biotech's Oracle

Consulting Biotech's Oracle

For three days, I watched visiting scientists drop their jaws to the floor as Haseltine and crew put on similar shows. The idea that everyone but Human Genome Sciences is panning the wrong river for genetic gold is a story that Haseltine shops expertly. It is a story that portrays the company as miles ahead of the many biotech and pharmaceutical firms that similarly are trying to make money from genes. Haseltine, both brilliant and brazen, is of course the hero, and there is an entire cast of antiheroes. The story ends with wondrous new drugs coming to market at lightning speed.

And it’s a story that many investors are buying: his company’s stock, of which he owns more than three million shares (after cashing in $56 million worth this spring), traded for between $35 and $107 in the past year. If Haseltine overinflates the tale, well, only one letter distinguishes hope from hype.

The other side of the story begins with the Human Genome Project, an international $3 billion effort largely funded by the U.S. government. In 1990, the project organized academics around the world to decode the entire sequence of human DNA. Separate from that project, Human Genome Sciences became one of dozens of biotech companies that sprung up in the early 1990s with their own fleets of machines working 24/7 to scour the raw sequences of As, Cs, Ts and Gs-the abbreviations used to designate the four chemical building blocks of a DNA molecule-for genes. All were racing to patent as many genes as possible before the data would go public.

Shortly after he cofounded Human Genome Sciences in 1992, Haseltine left Boston’s Dana-Farber Cancer Institute and tenure at Harvard University to become CEO of the new company. Within months of hanging up his lab coat, he signed a landmark $125 million deal with SmithKline Beecham (now GlaxoSmithKline) that gave the pharmaceutical giant exclusive rights to search the Oracle for leads on “small-molecule” drugs-the kind of pills that people swallow. Human Genome Sciences, however, retained the rights to develop treatments based on proteins-larger molecules, like insulin for diabetes or erythropoetin for anemia, that have to be injected. The deal blew minds in the biotech industry, which until then attracted investors based on the promise of bringing a drug to market, a process that could take over a decade and burn hundreds of millions of dollars. Human Genome Sciences showed that genomics companies could enjoy a steady revenue stream by selling information.

This bold move set off a cascade of events that changed what it meant to be a biotech company. Incyte Genomics, a Palo Alto, CA-based firm that sequences DNA, soon began selling access to its data and declared that it had no intention of even making treatments. Millennium Pharmaceuticals in Cambridge, MA, and Genset in Paris, France, soon cut multimillion-dollar deals of their own to help pharmaceutical companies find drugs by hunting through populations for disease genes. Next, a whole series of biotech firms sprung up around the idea of helping companies figure out the functions of genes, or the different proteins each gene instructs the body to make (see “The Proteomics Payoff,” ). “If all we did was be a catalyst for this change, which we already have done, we’d be a success,” says Haseltine.